I have been a CPA for over 30 years focusing on taxation. I have extensive experience with partnerships, real estate and high net worth individuals.
My ideology can be summarized at least metaphorically by this quote:
"I have a total irreverence for anything connected with society except that which makes the roads safer, the beer stronger, the food cheaper and the old men and old women warmer in the winter and happier in the summer." - Brendan Behan
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A Petition To Get The IRS Out Of Defining Family

I really like the idea of the We The People site. The bulk of the most popular petitions maybe not so much. You have to scroll down a bit to come to a tax related petition of interest. Repeal DOMA. I signed that sucker. (I know DOMA is about much more than taxes, but that is the part I have been writing about). I think the the thing to do with the Westboro Baptist Church, which is the focus of several of the most popular petitions, is to ignore them. Clearly there are a few hundred thousand people, who think otherwise.

What I Would Like To See On We The People

What I suggested in a previous post is that people who have spent a lot of time looking at tax returns, following tax litigation or in some other way studying our existing tax system put up some tightly focused petitions that might contribute to the cause of simplification. Ideally they should be, at least arguably, revenue neutral or in the case of egrigous abuses revenue positive. It is easy to say we should get rid of the AMT or the estate tax or as one petition puts it: Replace thefederal income tax code with a simple flat tax!, but the devil is in the details. It is distressing to think about it, but everything that is there is there because somebody thought it was a good idea. A lot of the more complicated provisions like the at-risk rules and the passive activity loss rules are responses to complicated schemes that people devised to frustrate a previously simpler tax code.

A Good Example

My friend Robert Baty inspired me in this. He put up a petition to repeal Code Section 107. It will not be searchable on the site until it gets 150 signatures. Code Section 107 allows “ministers of the gospel” to receive a tax-free housing allowance. There is no dollar limit making for televangelists and mega-church ministers using tax deductible donation to fund out-sized tax-free housing allowances. The definition of “minister of the gospel” is also rather elastic allowing for “basketball ministers”. Bob was an IRS Appeals officer and he has carried the fight against the “basketball minister” travesty into retirement. Personally I think that Code Section 107 should be reformed a bit rather than repealed, but I signed the petition to help the discussion along.

My First Petition

I decided that if I was going to challenge my readers and fellow tax bloggers to put up some tightly focused tax petitions, I should do a couple myself. Here is my first one:

Get The IRS Out Of Defining Family

Our tax code’s system of individual taxation is based on the typical American family of the 1950s. Significant simplification could be achieved by replacing the current four individual filing statuses with one and replacing personal and dependency exemptions with a single freely transferable credit.

Details

1. One filing status for individuals

2. No deductions for dependents

3. A freely transferable credit designed to achieve revenue neutrality with the current system. Credits of dependent children allocated by agreement of custodial parents, but defaulting to the mother if no agreement is reached.

4. Earned income taxed to person who earned it regardless of state community property laws.

Why This Is A Good Idea

The main objection to this proposal is that if it went through the Tax Court might have to lay off a couple of judges. I at least look at every Tax Court decision and read most of them entirely in order to be able to write about a few of them. In the last couple of weeks there have been four decisions about dependency deductions. “Innocent spouse”cases, where someone sees the dark side of joint returns are a regular occurrence. Then there is the mucking fess that conflicting laws about same sex marriage have created.

I really don’t have a lot of hope that this petition or my next one are going to get very far, but I want to let you know the type of thing that I have in mind. I will write a post about any tax petitions that have this type of focus regardless of whether I agree with them or not.

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Comments

Here’s the direct link to the IRC 107 petition that is being proposed in conjunction with the promotion of the ongoing FFRF litigation challenging the law as UNconstitutional (which course could take years to resolve if Congress and the President do not act):

http://wh.gov/QQOh

If there is the political will and public interest, Congress and the President could take all the time they want to craft a replacement provision that would pass constitutional muster and curb the abuses inherent in the law and its administration as currently written…after getting rid of the present law which, in my opinion, cannot be salvaged.

It seems to me that all the suggested petitions except the ones that do away with Title 26 in its entirety are just patches on an hopelessly broken system. You don’t put a patch of new cloth on a totally worn out garment. The garment just tears up faster. These patches to the IRC will ultimately result in more complexity and more confusion.

To address this complexity and confusion in the fall issue of 1999 of the Journal of Accounting, Robert W. McGee, then of Seton Hall University, wrote an article titled “Is the Internal Revenue Code Void for Vagueness? A Look at Some Economic, Legal and Ethical Issues” The following is the link to a site from which the article may be downloaded: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=242332 — (The link should be good. I checked it today.)

In summary, McGee comes to the conclusion that, indeed, the entire IRC must be declared void for vagueness. Any law which a person of ordinary intelligence cannot read and determine for himself the right thing to do is void for vagueness. What a deal it would be if someone or some group who had proper standing, filed suit to do just that. And wouldn’t a petition be a good spark to motivate said person or group?

Once the IRC was adjudged void for vagueness, the Congress would be absolutely forced to devise a simple taxation system. Already, there are a number of ideas for a simple system and with the onus of the judicial requirement to produce a system that is not void for vagueness, surely even better ideas will come forth. Will such a thing be a train wreck? No. Absolutely not. And it won’t be another fiscal cliff, either. Also, I rather suspect that all this will occur under the wonderful disinfecting sunlight of public scrutiny.

The biggest drawback that I see is that a simple taxation system will put a lot of people, whose work revolves around helping people with the present taxation system, out of work. That is regrettable, but not nearly as regrettable as letting the present tax system continue.

Draft the petition, put it up on the site, send me the link and I’ll write about it. I don’t actually think most of the Code is that vague. Much of the complexity comes from the taxation of income be inherently complex. Everything that is there is there because somebody thought it was a good idea.

While one might make a good sounding case for a different tax system, it is quite another thing to come up with a scheme that will actually gain political momentum and can be affected.

I think there is a flaw in the “patch” analogy.

Patches work, for instance.

The poster writes further, in part:

> Any law which a person of ordinary intelligence > cannot read and determine for himself the right > thing to do is void for vagueness. > > What a deal it would be if someone or some > group who had proper standing, filed suit to > do just that. > > And wouldn’t a petition be a good spark to > motivate said person or group?

I think the premise is misleading and/or simply not true; though we might not like it.

I propose, not being a lawyer or the son of lawyer, that there is no legal basis for shopping around for a Court to rule the Internal Revenue Code “Void for Vagueness”.

Anyone can file such a suit; no petition needed!

It doesn’t have to have legal merit, and the plaintiffs don’t need “standing”. They can file the suit and use the thing for whatever public relations/political reasons they deem appropriate.

Many, with “standing”, have tried to judicially have the Code declared “null and void” for one reason or another.

Look around, they all lost!

Repealing IRC 107 would, in fact, simplify the law. Peter can make the case for his proposal; mine has to do with IRC 107.

As for my issue, IRC 107, we have decades during which legal and tax scholars, of the bonafide kind, have noted the UNconstitutional claims against IRC 107.

We also saw where the 9th Circuit Appeals Court tried to reach the issue in Rick Warren’s case but was thwarted by the politics and political/legislative action of then President Bush and Congress, with, I think, Senator Grassley as sponsor.

Then the FFRF started filing stand along challenges to the law.

Then Senator Grassley even noted with his Commission that there were some serious legal and administrative problems with IRC 107. He didn’t have the political will to act and so out-sourced the discussion to his private, religious friends to think about and get back to him with some ideas (yeah, right, like Grassley’s going to be around by then).

The FFRF suit continues its course towards a January 2014 trial date, but that’s just the first level. It’s years to the Supreme Court the way such things usually go.

Congress and President could act by the end of January to repeal an obviously constitutionally flawed law, and start over if they wanted to establish another constitutional hand-out for do-gooders.

Here’s the direct link again to the IRC 107 White House sponsored petition:

I am certainly inclined to dislike complexity, but as a practical matter complexity is not much of a reason to have laws declared “void for vagueness” if even such a legal standard were to be found.

So I add these observations. The earlier poster wrote, in part:

> In summary, McGee comes to the conclusion that, > indeed, the entire IRC must be declared void for > vagueness. Any law which a person of ordinary > intelligence cannot read and determine for himself > the right thing to do is void for vagueness.

Talk about “vague” and fraught with all sorts of complexities; that standard would probably be worse than the IRC!

Really, is McGee serious? How did he come to that conclusion? Be specific?

What if only 1% of the law is beyond the reach of the ill-defined “person of ordinary intelligence”?

What if the “person of ordinary intelligence” could read and understand but won’t?

Why not start with something simple, and straightforward; repeal of IRC 107 on the basis that the Constitution prohibits such laws that allow ONLY “ministers” to receive their income income tax free.

Here’s that link again to the petition, and I’ll look forward to seeing the numbers grow geometrically as the holidays come to an end: